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4 Questions Plan Sponsors Should Ask to Understand the Similarities and Differences Between 401(k) and 403(b) Plans


1. Which employers can offer a 403(b) plan?



  • Public education organizations such as public elementary and high schools, state colleges and universities, and boards of education.

  • 501(c)(3) nonprofit organizations such as private schools, research facilities, private hospitals, charities, social welfare agencies, healthcare organizations, and religious institutions.

  • Grandfathered Indian tribal governments.

  • Certain religious ministers of a church or related religious organizations.



2. Which employers can offer a 401(k) plan?


Almost any type of company may offer a 401(k) plan. Most private, for-profit companies are eligible.  Many tax-exempt, non-profit organizations have a choice between sponsoring a 401(k), a 403(b), or both.


3. How are 401(k) and 403(b) plans similar?



  • Have the same 402(g) elective deferral contribution limits. For 2016, elective deferrals cannot exceed $18,000. 

  • Allow the additional catch-up contribution for employees over age 50. For 2016, the maximum catch-up contribution is $6,000. 

  • Allow Roth contributions. 

  • Allow both elective deferrals and employer contributions.

  • Require plan sponsor oversight. 


Before new 403(b) regulations were passed, plan sponsor oversight of 403(b)s was almost nonexistent. Generally, it was much easier for 403(b) plans to be exempt from the Employee Retirement Income Security Act (ERISA), as long as they did not include employer contributions. Since the final 403(b) regulations became effective in 2009, administrative responsibilities have been imposed on 403(b) sponsors and the two plan types have become more similar.



Click to learn more about the final 403(b) regulations or visit https://www.irs.gov/publications/p571/ch04.html.


4. How do 401(k) and 403(b) plans differ?













If you have any questions, or would like to begin talking to a retirement plan advisor about whether a 401(k) or 403(b) plan would be more advisable for your organization, please get in touch by calling (800) 388-1963 or e-mail us at hbs@hanys.org.

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